TaxTMI 
TaxTMI 
2025 (6) TMI 1990
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....and in the circumstances of the case, the ld. CIT(A) erred in deleting the addition of Rs. 32,63,37,484/- towards interest paid on debenture. (4) On the facts and in the circumstances of the case, the ld. CIT(A) erred in deleting the addition of Rs. 8,18,714/- as disallowances of business expenses i.e. site expenses, miscellaneous expenses, travelling expenses and sales promotion expenses, without appreciating the facts of the case. 2. Brief facts of the case as extracted from the orders of lower authorities are that a search action under section 132 was carried out on Omkar Realtors and Developers Private Limited and others group on 3rdJune 2015 at their business premises and various residential premises of its Directors and key persons. This group is engaged in the real estate development and construction in different parts of Mumbai City, focus on slum redevelopment. Assessee Company is one of the group companies of Omkar group. During the search action, various evidences in the form of cash generation, on money and cash loans, was found and seized. The statement of various key persons of this group was recorded. Consequent upon search action, notice under section 15....
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....itters. It is also seen that the remittances received for A.Y. 2012- 13 amounting to Rs. 135,07,07,150/- was already treated as non-genuine investment. A show-cause vide order sheet noting dated 18.09.2018 was issued to the assessee why the same should not be considered 'Nil'. In response to the same, the assessee vide its reply dated 04.10.2018 stated that the order of A.Y. 2012-13 cannot be taken as a base but did not substantiate the genuineness of the same. The explanation of the assessee is not acceptable. The accordingly, the ALP of the issue of CCD's amounting to Rs. 249,50,00,000/- and equity shares of Rs. 2,50,00,000/- by the assessee Created as Nil. 9. Interest paid on Debentures (Rs. 32,63,37,484/-) During the year under consideration, the assessee had paid an amount of Rs. 32,63,37,484/- at 17.75% as interest against the compulsorily convertible debentures issued by it. Vide order sheet noting dated 18.09.2018, the assessee was asked to explain why the same should not be considered 'Nil." The assessee vide its reply dated 04.10.2018 stated that the benchmarking was done by the assessee as per the internal CUP method and the lending rate....
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....pose of business as assessee has not brought any material on record to substantiate such expenditure. The assessing officer also disallowed interest on TDS of Rs. 3,95,663/-. 4. The assessing officer further noted that during search action on assessee group on 3rdJune 2015, it was established that on the basis of various evidences found during the course of search action that assessee is in practice of accepting on money from its customer for sale of residential Flats in various project over and above the sale consideration booked by the assessee in their books of account. The evidence gathered during the search action consists of numerous papers; excel seats found at the residence and office of key employees of group like Yogesh Begrecha, Lena Jain, Vishal Joshi. The assessing officer by referring the statement of such persons held that on the basis of various facts and admissions by key persons including Chairman of Omkar group it was established beyond doubt that they were accepting on money in various real estate deals. The assessing officer prepared summary of on money in various project of Rs. 105.41 Crore. It was further recorded that the group has filed application befor....
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....respect of other booking also. The said seized material reflects that on money was received only in respect of some of deals carried on by the assessee company. In absence of any evidence, cash component of on money cannot be presumed in respect of other deals carried out by assessee in various years. On the basis of such contention the assessee stated that on money should not be extrapolated. The assessee also relied on various case laws which have been recorded in the part of submissions. The assessee in its without prejudice contention stated that estimation of on money is being made on the basis of rates available on the website that is www.99 acres.com. The rates adopted in the show cause notice are not only unreasonable but based on several hypothetical presumptions. The rate of sales mentioned on such a website cannot be considered as the market rate to ascertain the established sale value of the flats sold by assessee. The rate shown on the website merely reflects some hypothetical rates and offer made by various parties. The offers placed by the sellers and buyers cannot be considered as the prevailing market rate. The reply of assessee was not accepted by assessing office....
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....Thirdscroll Holding Limited and Azapel Holding Private Limited. Further valuation report of Chartered Accountant for the purpose of issue of CCD, was also filed. The assessee also filed copies of bank statement, balance sheet, profit and loss account, shares application form, Board resolution in respect of investing companies. The debentures were issued through banking channels. Thus, the identity and creditworthiness of investor and genuineness of transaction was proved before assessing officer in respect of issuing of CCD. The assessee further submitted that assessing officer wrongly observed the debenture were issued at high premium, however, in fact, the debentures were issued at the face value of Rs. 1000/- and no premium was received. It was also submitted that in respect of share premium of Rs. 40/- per share issue to as Azapel Holdings Private Limited in financial year (FY)2011-12, for which addition was made by assessing officer and it has been deleted by CIT(Appeals) 51, Mumbai vide order dated 31 December 2018. The assessee also furnished the issue of share capital and debenture was capital account transaction and it was not the international transaction. Further, the re....
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....on as per method prescribed therein. The TPO has not followed any of the prescribed method, i.e. CUP, Transaction Net Margin Method, Resale Price Method, Profit Split Method or any other method prescribed in the Act/ Rules. The TPO has merely doubted the identity and creditworthiness of the investor and genuineness of transaction. The learned CIT(Appeal) by referring the decision in case of LintasIndia (P) Ltd (2019) 107 taxmann.com 426 (Mumbai Trib) and in John Deere India (P) Ltd Vs ITO (2017) 82 taxmann.com 201 (Pune-Trib) wherein it was held that where TPO had not proposed adjustment as per the procedure laid down under the transfer pricing provision, there was no merit in ad hoc disallowance of royalty. The learned CIT(Appeal) further held that TPO was bound to follow any of the method prescribed in section 92C(1) and Rule 10AB to determine ALP of the transaction, therefore the TPO was not justified in determining the ALP of the transaction on issue of CCD to Thirdscroll Holding Limited at Nill. So far as other aspect of identity creditworthiness and genuineness of transaction of issuance of CCD and equity share is concerned, the learned CIT(Appeals) recorded that on identical....
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....on expenses without giving any cogent reasons or any basis, as to how he has disallowed all the above expenditure, which were incurred for the purpose of business. The disallowances were made on assumptions and presumption. The assessee also relied on certain case laws. 10. The learned CIT(Appeals) on considering the submission of assessee recorded that site expenses of Rs. 63,971, were in the nature of staff welfare and local purchases, was incurred wholly and exclusively for the purpose of business. Miscellaneous expenses of Rs. 1,57,869/- were also in the nature of sales pavilion maintenance and office related expenses. Thus, these expenses were also wholly and exclusively for the purpose of business. Further travelling expenses of Rs. 1,00,244/- was related to the travelling for the purpose of business. The sale promotion expenses of Rs. 4,96,304/- in the nature of promotional activities for existing client for increasing sales therefore, the sale promotion expenses were also incurred wholly and exclusively for the purpose of business. The learned CIT(Appeals)also recorded that such expenditures were not in the nature of capital or personal and were expanded exclusively for ....
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....velopers are not allowed to sale the units below the market rate value as per the provision of section 43CA, wherein the value of sales as Stamp Valuation Authorities is held to be the premium value, in the event of sale made by developer at the lower rate. The assessee also stated that in assesses own case for assessment year 2012-13 the assessing officer made addition of on money of Rs. 40,41,471/-. Against the addition in the assessment order, the assessee filed appeal before CIT(Appeals),wherein the addition was restricted to 25% of such on money. 12. The learned CIT(Appeals) on considering the decision of his predecessor, and by extracted the relevant part thereof, in his order held that on identical issue of 'on money' in earlier assessment year, the addition was restricted to 25% of total on money. Therefore, the assessee was allowed similar relief. Aggrieved by the relief allowed to the assessee, the revenue has filed present appeal before Tribunal. 13. We have heard the submission of learned commissioner of income tax- departmental representative (CIT-DR) for the revenue and the learned authorised Representative(AR) of the assessee. Ground 1 of the appeal relates to ....
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....any of assessee group i.e. Omkar Relater and Developers Private Limited filed application before Income Tax Settlement Commission and paid tax on entire 'own money' of assessee group. The assessing officer, in case of assessee also computed addition of on money based on rates obtained from 99 acres website for assessment year 2012-13. After reducing the rate by 20%, the assessing officer extrapolated the figure for assessment year 2013- 14 to assessment year 2016-17 without any independent application of mind or analyses specific to assessment year under consideration as well as to subsequent assessment year as well. No incriminating material found in seized material indicating receipt of on money found for assessment year 2013-14. Despite absence of corroborative evidence, the assessing officer made arbitrary addition of Rs. 87,30,695/-solely on the basis of extrapolation. The learned Commissioner (Appeals) restricted the addition to the extent of 25% of said addition thereby restricted to Rs. 21,84,741/-. Similar addition was made by assessing officer in earlier assessment year and on appeal by assessee before CIT(Appeals) the addition was restricted to 25%. To avoid e litigation....
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....ired to determine ALP in accordance with TP Regulation. 18. The ld AR of the assessee submits that learned CIT(Appeals) after considering the submissions and considering the order of his predecessor in assessment year 201-213 held that issuance of CCD was in the nature of capital transaction and accordingly deleted by following the decision of his predecessor. On the deletion of addition on account of interest toward CCD, the learned AR of the assessee submits that assessee receive aggregate amount of Rs. 249.50 crore from Thirdscroll Holding Limited, a company based in Cyprus during a by 2012- 13 and assessment year 2013 14. Details of funds received against the issuance of unsecured compulsory convertible debenture were issued against such money, out of which CCD of Rs. 132.57 crore were issued in assessment year 2012-13 and of Rs. 116.92 crore was issued in assessment year 2013 -14. The CCD carried an interest rate of 17.75% per annum. However, interest liability on these CCD has been booked a entirely in assessment year 2013-14. No interest expenses were recognised in the financial statement for assessment year 2012-13. The rational of booking the interest expenses in assess....
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.... addition by taking reference prices from the website 99 acres.com for the corresponding period and of his own reduced 20% to compensate all odds that it preferred location charges floor rise etc, and worked out the alleged-on money figure of Rs. 87,38,695/-. We find that the ld CIT(A) restricted the addition to the extent of 25% thereof by following the order of previous assessment year. We find that the assessing officer has not made addition on the basis of any evidence in his possession. Thus, on independent examination of facts of the present case, we do not find any justification for making addition on the basis of extrapolation, hence, we uphold the order of ld CIT(Appeals) with our additional observation. In the result, this ground of appeal is dismissed. 21. Ground No. 2 relates to deleting the addition of CCD and ground No,3 relates to addition of interest payment. We have recorded the basis of making both the additions and deletion thereof in preceding para, which is not repeated here. We find that the addition is not based on any evidence found during search action. Rather, the assessing officer while making reference recorded that assessment in this case has become ....